A five year MACRS asset which cost $50,000 with zero terminal value was sold at the end of its useful life for $20,000. The tax rate is 40%. is the net after- tax cash inflow resulting from the transaction.

Question

Quizplus · Accepted Answer

The net after-tax cash inflow is calculated by taking the sale price, subtracting any tax on the gain. Since the asset is fully depreciated, the gain is $20,000. The tax on the gain is $20,000 * 40% = $8,000. Therefore, the net after-tax cash inflow is $20,000 - $8,000 = $12,000.

A Five Year MACRS Asset Which Cost $50,000 with Zero